What Will Happen if the Economy Collapses?

what will happen if the economy collapses
Image Credit: Austrian National Library

The interconnectedness of the world’s economy has offered tremendous investment and business opportunities for many. Our ability to meet with people throughout the world from the comfort of our laptop screen has dramatically altered our lives. Financial and economic transactions happen in split seconds. Possibilities feel limitless. However, crises, anywhere in the world, can set in motion a series of negative events.

An economic collapse in the United States would ignite a long-lasting global reaction. Responses would range from money issues – hyperinflation and bankruptcies; to supply shortages, affecting utilities and food, to social upheaval, including lawlessness; that could last for decades.

Understanding the differences between cyclical expansion and contraction in our economy is important to grasp the extent of a collapse. Knowing the complete ramifications will allow you to prepare for an economic disaster. Continue reading for a historical glimpse at an economic collapse to steps to self-preservation.

Let’s Look Back At The Great Depression

An economic collapse, the Great Depression, began after the stock market crashed in October 1929. The resulting panic caused millions of worthless stocks to be traded. Life savings, in a single week, were irrevocably lost.

Erosion of consumer confidence began the series of ripple effects from the stock market. People reduced their expenditures, which led to factories decreasing their production schedules. Other related businesses scaled back. As banks began to close, the cycle of reduction in spending and production escalated.

Businesses still operating let go of workers; others cut back on wages. Again, the cycle of decreased spending and production intensified. Americans were now purchasing on credit and plunged into debt. Homes were foreclosed upon, and other possessions were repossessed. At the deepest depth of the Great Depression, more than fifteen million or one in every four Americans were unemployed.

Runs on banks as investors sought to obtain their money contributed to bank panics. Banks were compelled to liquidate their assets to obtain cash. This contributed to the plummeting value of their investments. Adding to the dire circumstances, almost half of all the United States banks had failed. Globally, the use of the gold standard to establish currency exchanges expanded the economic troubles to worldwide issues.

Breadlines and soup kitchens sustained many Americans. Homelessness increased dramatically. Farmers could not afford to grow their crops, so they abandoned food in their fields. Thousands of people migrated to cities seeking employment.

The Dow Jones Industrial average did not return to the pre-crash level until 1954.

What Will Happen If There’s an Economic Collapse?

An economic collapse is a widespread failure of a country’s economy. An economy is not a tangible concept. It includes a vast interconnected system of production and consumption or sellers and buyers. For the system to operate efficiently it needs a balance of supply and demand. A means of payment for materials, labor, and goods are woven into an economy.

Countries’ economies continually expand and contract. After heights of expansion, an economy will usually slow or contract. There is a multitude of factors that cause economies to grow and contract. Without warning an unexpected cataclysmic event can create a monetary crisis. Or weak economies that have been downturn with a series of contractions can collapse.

Economic collapses are not part of the normal economic cycle. An economic collapse is a pervasive breakdown of the normal system of supply and demand with far-reaching effects due to the complexity and scope of an economy. Recovery from an economic collapse will take years to many decades for a country to fully rebound.

The Dollar Will Collapse

An immediate impact of a precipitous crash would be monetary turmoil. Shock waves would reverberate globally. People would rush to banks and ATMs seeking cash. Cash would be depleted quickly. Banks would need to shutter their doors to reduce withdrawals. Any banks that did not go out of business on that first day would need to cease lending. Credit cards would soon become worthless. Treasury bonds would lose their value. People’s retirements would be eradicated.

The value of the dollar would be greatly diminished. Investors would seek to purchase other currencies, which would further devalue the dollar. Inflation would rapidly morph into hyperinflation, which is when prices for goods and services increase over fifty percent in one month. The price of a gallon of milk would be ‘X’ in the morning and ‘X’ plus inflation by the afternoon.

Businesses without cash to pay employees or purchase materials would close. Even companies with cash might not have access to utilities. It would depend if the collapse affected the local government’s control of water and electrical sources. Millions of people would lose their jobs and income. Unemployment would skyrocket.

People who found work would not have a steady income to rely upon. Others would be underemployed and working in different jobs than before the collapse. Pay rates would be much lower than before the economic disintegration, so people would be earning much less. At this point in the collapse, people might not be paid in currency.

Bartering and trading will replace money. Returning to a more traditional economy of exchanging one’s talents and abilities in exchange for money will be the base of the economy. Instead of receiving a paycheck, people would be working for food or other necessities. People who are able to grow food will be able to trade that for other essentials.

There Will Be Supply Shortages and Outages

With businesses closing because of a lack of money, supply shortages would occur. Stores that remain open will struggle to fill their shelves. Feeding one’s family will become a challenge. Life-threatening food insecurity will result. Depending upon how rapidly food supplies are diminished, food issues could lead to starvation.

Panic, as people fight for survival, will cause turmoil. People will stock up on supplies in a frenzy to protect themselves and their families. Shortages will be created quickly. Manufacturing to resupply goods will be sporadic at best. Depending upon the government’s reaction, rationing of essentials could be the next step. Instead of calming the situation, limiting people’s access to water, electricity, heat, and gas could ignite a volatile situation.

There Will Be Social Upheaval

Fear and uncertainty could lead to pillaging for survival. Plundering stores for luxury goods would provide people goods to barter. The human instinct for survival will take over. Social structures will be disrupted. Neighborhoods will be dismantled as homelessness grows dramatically. Existence will depend upon one’s ability to step back in time. Knowing self-defense, hunting, and basic human instincts for survival will be essential. New norms of existence will be essential.

Political unrest will happen at the structured levels of society. Local and state governments could shut down. Many government officials at this level are volunteers. These people will be fighting for their own personal survival. Fulfilling their roles in the government may not be possible for them. Fighting for their families may become all-consuming.

At the federal level, trying to control the anxiety people will be feeling will be a monumental challenge. Communication systems will be unreliable. Maintaining a means to share a coherent message will be a struggle. Riots and pandemonium could result. Without having a known and detailed plan to latch onto will cause citizens to disregard law and order. For survival, people will seek to take care of themselves first.

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